Auction Due diligence startup

15 Replies

Hi everyone,

My name is Walter I wanted to run something by you guys, seen how much knowledgable people post in hese forums.

Myself and 2 other co-founders are in the beginning stages of a startup (not advertising or anything even similar) i just wanted to get feedback from you guys on what we are working on.

the main idea is this:

We are creating a platform that will provide the user from:

Basic general foreclosure information to advance auction and foreclosure process analytics and forecasts.

We are currently mapping and analysing 5 years of foreclosure auction records (over 138,000 in miami dade alone) and have found a lot of interesting information, we believe that we can create an algorithm that will allow us to predict:

Cancelations

Plaintiff's high bid amounts

3rd party winning bids amounts

Just to name a few!

We are also integrating public records and 3rd paty data to automate the due diligence process making it available to everyone from small to big investors at a fraction of the price.

Of course these are just a few details, but i wanted to get your opinion on what we are trying to do.

I would love to get some feedback or answer anu questions.

Hope this is something that you will find interest.

Best regards!

Sorry but burst your bubble but there is not much of a market for this.  The amount of people that buy at auction is limited and there are already 2-3 services that provide auction data and comparables. 

You really can't predict when an auction is going to be canceled. The number one reason for a cancellation is bankruptcy filing or a judge giving the defendant an extension. 

As for the plaintiff's high bid and the winning bid that is tough too. Different banks have different people that research the comps and set the high bid.. So, Bank of America may have 20 different people that set high bid amounts.  As for 3rd party winning bids that is pretty easy at 70-80% of current market value. 

Just my 2 cents as a foreclosure buyer.

If you really think you have it figured out prove it.. Run your algorithm and Post 10 auctions in this upcoming week in Miami Dade with the risk of cancellation, plantiff's high bid and the winning bid amount and let's put it to the test.

Thank you for your input Ray.

Just a little background of who we are.

My backgrown is 12years of managing portfolios of THOUSANDS nonperforming loans through the foreclosure process.

My "tech" cofounder's backgrown is business Intelligence , data integration,  and analytics.

And my last cofounder's is pool acquisition, funding and boarding.

All in the mortgage industry.

I completely agree with you that there are some companies providing auction data and comparables but they are very basic, close to useless info imo.

Your reasons for cancelations are also accurate, but again i believe this is common knowledge for any respectable foreclosure investor.

What we've noticed is that patterns do exist! 

I.e. across the board in Miami dade for the last 5 years "63%-67%" (with a few variances) of monthly sales are canceled...(i know this doesn't help much!) But when it gets interesting is when you start analyzing these cancellations at the "lowest common denominator" we are starting to see different characteristics and commonalities a lot of them share.

I'll put it to you this way...by looking at the court docket, reading the documents, researching the borrower i can give you a very good idea  close to certain if a sale will get canceled and why.

There are many telling signs that will increase the chances of a cancelation:

how old is the foreclosure action?is the borrower represented by an atty? Does the property have good equity compared to the debt? is this the first sale scheduled? Is the property homeastead? Just to name a few..

A case with those characteristics will 99.99 of the time get canceled.

Now, our job right now is to map these and many other characteristics and automate this process and be able to run a script against upcoming sales to find these key points and have a solid forecast.

Regarding the highest bids from banks you'll be surprised how common it is to figure out their formula. Again they also have commonalities that will let you know if they will bid close to market value. Are they the originators? Was this loan transfer to another investor who paid pennies on the dollar, is the location of the property flooded with bank reos? And again history is the best predictor.

Quick tip: Look for properties that has had sales resinded or a previous cancelation where bids were taken. That will tell you how that bank will bid the next time that property goes to sale.

Hope this helps.

Your imput is very valuable as we want to bring a solid platform for investors like you, so pocking wholes in our model is what we need to better our process and bring something helpful!

As for the market being limited i can tell you from my own axperience here in miami dade, there is a monopoly on auction sales. Not every investor wants to spend the time or money doing due diligence on tens of properties only for the sales to be cancelled or outbid by the bank or other bigger investors.

Our goal is to have the due diligence available for everyone so we can level the playing field.

The other issue is reaching your target market. The 'old school" guys would hand out their Free copy at to everyone that came to the foreclosure sales. Now that they are online that would be a bit tougher. I guess you could go through and see the successful bidders of past auctions and try to contact them. You can't really determine value of a property without having pictures of past sold properties. Right now the MLS provides the best interior pictures of past sold listings and also pictures of expired listings that didn't sell. This is how we determine value. Your hard copy" competitors are giving a valuation range but sometimes that is $100,000 difference between the high and low selling price which doesn't give much useful information.

I would say the most valuable thing you could provide to me as an investor would be the bank's reserve with a level of certainty percentage. If that was accurate it would save me a lot of wasted time in research.

Our idea is to have a beta program and give access to our platform including our due diligence packages (including comps, market and area analysis) for free to investors interested so they can "test drive it" that way we get a good idea of what changes or additions we need to make before we even consider taking it to market.

There is A LOT to what we are doing i'll be glad to send you more info via email as it is too vast to detail in a forum.

Again my goal right now is to get your input and any aspects you believe we are not considering.

Thank you again Ray.

Well my best input would be to make sure and pull all pictures and descriptions of all Sold, under contract and active comps into your system. Comps without pictures are pretty close to useless.

"I would say the most valuable thing you could provide to me as an investor would be the bank's reserve with a level of certainty percentage. If that was accurate it would save me a lot of wasted time in research."

That is one of our Goals ray! 

As we see more and more data we are confident we will be able to forecast that aspect as well but again our goal is to be able to provide you with every forecast posible and making the due diligence process be seamless, one stop shop!

I will keep you in mind!

"Well my best input would be to make sure and pull all pictures and descriptions of all Sold, under contract and active comps into your system. Comps without pictures are pretty close to useless."

I agree, i will make note of this.

GREAT FEED BACK!!!

The other thing that would provide value is to pull mortgage, lien, and satisfaction history from the public records.  Creating a pencil search.   You could charge separately for this option.   As I'm sure you know Miami Dade foreclosures are sold subject to any liens and mortgages and most novices don't know how to do a title search without having a title company do it.

"The other thing that would provide value is to pull mortgage, lien, and satisfaction history from the public records. Creating a pencil search. You could charge separately for this option. As I'm sure you know Miami Dade foreclosures are sold subject to any liens and mortgages and most novices don't know how to do a title search without having a title company do it."

Ray, people having to pay for title search and due diligence i believe is the main reason why the market is monopolized by a few. Its expensive and if someone is not EXTREMELY experienced doing this you will be open to those horror stories.

And Most people start backwards, before doing title you do this:

Start by looking at the court docket read the complaint and final Judgment  (ofcourse you need to have some knowledge to read these docs) look at who is named in the foreclosure case, this will do 2 things for you 

1. give you a starting point and an idea of how many parties are involved.

 2. Get a list of liens that should be wiped after the fcl (no going into liens that will survive the fcl right now) 

Now start your title search!

If you find a significant lien NOT listed in the foreclosure you can stop your due diligence!!!

*Ofcourse there are exceptions to this rule.

Ray, our idea is to integrate all available public records to our platform clerk of courts recoders office, tax, city for violation open permits ect, public appraiser office ect.

Another common mistake many people do including title companies is THEY DO NOT LOOK FOR VARIANCES...what i mean by variances?

name combinations IE. DEBORAH, DEBBIE, DEBRA ,search by legal description, search by address.

Many times you see liens under the property address but the wrong legal description and viceseversa.

Due diligence is all about attention to detail and expect the unexpected.

We want to make this seemless and very straightforward in our platform, where we provide a type of "due diligence checklist" and tools to do it yourself or for a fraction of what a title company will charge just for lien search we will give you a FULL due diligence package.

THAT'S the dream my friend..but we are getting there!

now, one concern we do have is disrupting this niche market!

We don't want to flood the auction with inexperienced buyers that will ultimately raise prices and make it too competitive.

That is a big concern for us, what do you think?

That was already done when they converted to online auctions.   For everything New Yorker than buys a South Beach condo at foreclosure online for the condo association judgment only to find out after the auction that there is a huge first mortgage there are 3 more ready to take their place. That's why I mostly buy in the Washington DC area now.  : )

Originally posted by @Ray Slack :

That was already done when they converted to online auctions.   For everything New Yorker than buys a South Beach condo at foreclosure online for the condo association judgment only to find out after the auction that there is a huge first mortgage there are 3 more ready to take their place. That's why I mostly buy in the Washington DC area now.  : )

 I swear i still hear people bragging about "the apartment they bought for 20k "  i just close my eyes and ask my self "how does this person made 20k to begin with if he believes theres such a thing"

Hi everyone,  so i wanted to give an update on the auction due diligence startup i began working on 5 months ago.

We are finally getting ready to launch but ofcourse i would love to get some more feed back, since a lot changed since i last posted.

We changed our model , in my opinion created something better.

We finally have our product , after several pivots and different tech guys we finally found a great team . We moved away from forecasting (which i think is definitely still posible) and instead after a lot of work and data analysis we were able to map and automate the auction due diligence , even though there are many features we want to incorporate i believe we have Something good to offer.

As an experienced investor would know a good due diligence should at least have:

Title search (veryfying lien and most important the mortgage position)

The foreclosure case analysis including docket updates.

A solid Bpo

Taxes oweded

Open permits

Mechanical liens

Zooning

Property details (rooms, size ect)

Hoa info

Ect.

Well from my iwn experience this process if done by an experienced investor might take 2-3 hours per property.

With the high cancelation been 60+% due diligence should be started Thursday for monday auctions (miami dade).

We accomplished to map, test and automate  the process where our solfware pulls about 1000 sales in 4 hours.

I will love to here your thoughts and feedback if this is Something that would be helpful and worth the time we've put in on accomplishing this. Any feedback,  or questions are welcome.

Thank you all in advance!

Walter holmes.

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